Inequality Is Only Getting Worse

Inequality Is Only Getting Worse

The typical American family today has less wealth than the typical American family of the 1980s.

December 29, 2016

A Donald Trump supporter waves a United States flag as he and others face off with anti-Trump protesters in Bethpage, New York, April 6, 2016. (Craig Ruttle / AP)

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Donald Trump boasted that his election reflected the “voice of the people,” but it was mostly the voice of fear. And while ingrained racism and misogyny drove much of Trump’s support, his popularity reflected a massive sense of loss: real economic loss, perceived cultural loss, and anticipatory loss for their children’s generation. Just how “real” this decline actually has been, however, depends on where you stand, and where you’re falling from.

A recent study of stratification and eroding quality of life across generations, between races, and between socioeconomic classes sheds light on how America’s so-called “middle class” perceives itself.

Social-inequality trends over the past half century indicate that class divisions are growing more rigid, most are getting worse off, and those at the bottom are falling further, faster by the day. It’s the momentum of change that is causing much of the pain and anxiety, as many self-identified “middle-class Americans” are realizing the truth only now: They were never as well-off as they thought they were.

“Overall, if you look back 30 years, most of the distribution [of wealth] is lower than where it was in the ’80s. So…the typical American family today has less wealth than the typical American family in the ’80s,” says University of Michigan sociologist Fabian Pfeffer, who co-published a new research collection on trends in inequality. And yet, Pfeffer observes, higher on the economic hierarchy, affluent households experienced “the mirror image,” accruing riches and power at others’ expense.

For households losing wealth, Pfeffer found that social insecurity hurts from many different angles: not just in the evaporation of housing and retirement wealth but also through declining health, diminished prospects for their kids, and ensuing despair and anger.

“One of the things wealth gives you is safety and security,” Pfeffer says, but when insecurity becomes chronic “as labor markets become more insecure…and as public safety nets become more porous…that role of private safety nets, such as in the form of wealth, may become even more pronounced.”

Take the case of a working-class, jobless white youth in a marginal postindustrial suburb. He hovers in the same social status as his blue-collar parents, but his life is markedly harder than theirs were. He is priced out of higher education in a community with few living-wage jobs and has virtually none of the health or retirement benefits his parents attained through their now-vanished industrial vocations.

But white anxiety about middle-class precarity is only part of the picture because the middle-class was always built on structural inequality and social exclusion. The anxiety Trump manipulated so deftly on the campaign trail expresses real agony that working people are feeling. Yet the people who aren’t represented in Trump’s support base are in many ways suffering the most from long-term economic polarization.

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Compared to whites, the downward trajectory has been steeper in communities of color. A typical low-income black kid has even dimmer college prospects, having been deprived of early education and decent housing and health care from birth. She grows up with greater exposure to traumas like mass incarceration or foreclosure. Racial discrimination limits her career opportunities and she moves from teenage poverty into inescapable, lifelong debt after getting hit by predatory lenders. While her parents were also poor, they benefited from public welfare and education programs, and retired with modest savings instead of an underwater mortgage.

Towering high above both these young people is the affluent white youth who inherits her parents’ educational advantages, graduates debt-free, and has the social capital that accrues over her formative years spent in a privileged community network. Her segment of society is pulling away from both low-income black and white communities.

Pfeffer’s analysis shows that “the probability of becoming part of the wealthiest 20 percent of Americans is seven times greater if your parents were also in the top 20 percent [of income earners] instead of the bottom.” And social mobility could decline further in the coming years. This is in part perhaps why Trump was able to win votes with his vision of restoring “greatness,” but such a restoration is a return to a fundamentally unfair social structure built on a zero-sum economy that has been cratering on itself for decades.

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Such political polarization can poison democracy. As Princeton economist Angus Deaton contended, since economic elites are inclined to push policies that impoverish public social infrastructure and distribute wealth upward on the income scale (and into their pockets), the political system becomes increasingly undemocratic—and plutocracy becomes even more entrenched.

The 50-year trajectory of class polarization isn’t likely to end anytime soon. A political solution probably isn’t forthcoming under Trump’s impending reign of chaos. But for the rising generation, there may be some promise in the debate around rebuilding “infrastructure.” Rather than roads and bridges, however, a more radical approach would develop our social infrastructure. An emphasis on social programs that would directly benefit people’s lives could be a redistributive, comprehensive corrective for the wealth gap, and would carry real populist appeal.

“The one public infrastructure that I see as the most in need of public investment is education,” Pfeffer says, “and that is also because the private investment [has grown] more unequal, partly thanks to this growth in the wealth gap.”

In coming years, there will be a chance for a grassroots movement to emerge and press for a stronger public-education system as an intervention against further decline in the next generation—it could stop kids today from falling through the gaps that ensnared their parents.

Trump found support among people who supposedly lacked formal education. Yet they keenly understood how it felt to be cheated by the system. The blame for middle-class decline, however, which should be aimed at the top, was tragically misdirected at others on the bottom, whom Trump and right-wing media inaccurately portrayed as having an unfair advantage. Overall, a huge chunk of the country is sliding down; some have just been slipping a little faster in recent years. The more crowded it gets on the bottom rung, the harder it is to see those climbing at the top and leaving the rest of us behind.

Thomas Piketty well documented book explains the appearance of "middle-class" as historic aberration, due to big shocks of XX-century - 2 great wars, and the follow up socio-economic upheavals. There was no "middle class" at the turn of the century, when top 1% owned 90% of total wealth, while bottom 90% owned nothing. Those numbers reversed dramatically in the post-war years (50-70s) - the peak of progressive era, when the 1%-share dropped to appalling 40-50% of total wealth. Alas, the Capital took over and reversed the trend after Reagan-Thatcher "counter-revolution" of 80s. Now we're rapidly approaching the XIX-century "gilded-age norm", and trend continue may soon reach even better "XVIII-century paradise", just at the dawn of French revolution.
To prevent more radical solutions to the curse of inequality, Piketty calls for overhaul of income and wealth taxation (highly recommended book).

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Wesley Deckersays:

January 2, 2017 at 10:44 am

The ancients wrote of scoundrels who, like fowlers, set traps to catch human beings. Remembering how treacherous we've made human existence, it's no wonder we're afraid. What's needed isn't political victory, though, so much as reconciliation to our common fate.

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Timothy Trewynsays:

December 30, 2016 at 4:52 pm

Ownership decisions on employee pay raises are, no surprise, generally conservative. What government might be called upon to do is convert subsidies for the prosperous to capital for the spread of ownership. Then we will see if the new owners remember where they came from.

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Fred Carusosays:

December 29, 2016 at 5:51 pm

Ironically, the post WWII boom was partially driven by taxes, huge taxes on the very rich, needed to pay off the war debt/bonds.

In order to avoid the highest tax rates, individuals and corporations would re-invest their income, in their businesses, or other businesses, as tax deductions, to lower their taxable income. This was stimulus that drove the boom.

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Michael Laveringsays:

January 2, 2017 at 10:38 am

Precisely!! All the evidence confirms this.

The Debt was less than a trillion dollars when Reagan took office, he got the tax rate lowered from 70 to 50 precent and the debt almost tripled, the Bush I lowered the tax rate again and the debt doubled again.
Clinton came and taxes went “up” to almost 40%, the debt held steady, but we must remember that were it not for the internet expansion to the economy the debt would still have increased under Clinton.
Then of course BushII comes in and says in light of three years of surpluses “this is our money” and lowers the tax rate again, with no concern for the almost 6 trillion debt, and the debt doubles again.
Of course the debt doubled again under Obama.
But what folks really fail to consider is Republicans have reduced the tax rate in good times, when we are most capable of paying down the debt, and then want to whine about the debt when the economy is in full retreat.

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Walter Pewensays:

December 29, 2016 at 4:47 pm

This was very obvious to me even back in the 1980's. Essentially what Reagan and co. did was set up a period where people were feeling comfortable on the last vestiges of post WWII economic development. We could live for a few years on economic and social capital that had reached peak development during the 1960's. Families that were from the era were finishing up-sending kids to college, last of the baby boomers coming of age. It was glaringly apparent we were not creating anything resembling the affluence of my youth in the 1960's but no matter-credit cards got thrown at everybody to fill in the gaps, and keep the charade going.
It's been 30 years since we drained the last of the postwar affluence out of the country. Now it's based on speculation primarily, we build virtually nothing. Most of us knew it was coming then, we just did not know the exact shape it would take.
Gen X became the tragic group who saw what had been built for them but never really knew at what cost. And I have the feeling most of them never will. Millennials know all too well what has been left for them. but they probably generally do not know exactly why and how it happened. The word stealing is not too strong.

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Joel J Gormleysays:

December 30, 2016 at 10:40 pm

Reagan fueled the economy with huge public investment in military hardware that he financed with borrowed money. He set a bad example of maintaining a standard of living on credit, both public and private. Financing that debt out of current income may be one reason for wage stagnation,

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Josh Nilsensays:

December 30, 2016 at 2:20 am

Inter-generational theft.

The millennials know. Why do you think young people are so bitter / are withdrawing from work and society?

It's just a ponzi scheme / con game against us.

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Walter Pewensays:

December 30, 2016 at 2:48 pm

It's not so much against you as it is for them. I watched in my twenties during the 1980's. A lot of the people who made it through college or bought homes, etc. got real scared real fast. They knew how good they had it. Most law has been written over the last three decades to insure they keep it. In that sense, it is simple. Most of them will deny it, either consciously or unconsciously, but they know it. And they have spent their adult lives with this fear lingering in the background. So they treat the young like shit, unless it's their own pampered little white ones, frankly.

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Fred Carusosays:

December 29, 2016 at 7:33 pm

Stealing from us. Hate sound like a right winger, but Social Security is stealing from us. We pay in real-value dollars, but i.e. my Social Security with their Cost-of-living increase, the bogus CPI.

My social security went from $401 in 2005 to $437 in 2017. If it were only keeping up with inflation, the value of the dollar, I would be getting close to $800 today.

Another rip-off is waiting for the small real estate investor, because the buying price is not indexed to inflation. So for real estate, we now have an "inflation tax" that they call a capital gains tax.

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Walter Pewensays:

December 29, 2016 at 10:36 pm

Well, on Social Security it's pretty obvious to me they dare not tamper with the formula or else risk the wrath of the right. No, it does not resemble reality in terms of inflation and real costs of living, but look at the minimum wage--it really would be closer to almost twenty dollars if indexed accordingly. The whole economy is based on the Reagan period solidifying freezes on everything that resembles fairness. That's what they planted in bedrock in Washington, it stuck, and now it's so illogical we look like Argentina swirling down the drain in 1950.

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Doug Barrsays:

December 29, 2016 at 11:01 am

There are two ways this can go. Inequality will continue to get worse until we end by economic self-destruction, or we raze our vertical economy and inequality ends allowing self-creation to begin. The latter end will require a massive increase in realized mental capacity so the former end seems far more likely for it seems humanity wishes to remain stupid. https://thelastwhy.ca/poems/2012/12/13/economy.html

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Michael Laveringsays:

January 2, 2017 at 10:43 am

Or the third option, the French revolution’s answer to equality, guillotines set up on the mall.